East Millinocket lays off 4 town workers in response to mill’s nonpayment of tax debt

Great Northern Paper Co. LLC in East Millinocket is shown recently.
Great Northern Paper Co. LLC in East Millinocket is shown recently. Buy Photo
Posted March 13, 2014, at 12:43 p.m.
Last modified March 13, 2014, at 7:39 p.m.

EAST MILLINOCKET, Maine — Town leaders have laid off four town workers and rewritten a job description for a fifth due to Great Northern Paper Co. LLC’s nonpayment of its $657,900 property tax bill, officials said Thursday.

Two full-time Police Department positions, a part-time fill-in and a full-time “floater” in the Public Works Department were cut. The Fire Department has transferred a firefighter-EMT to the town ambulance service and left a position open in the Fire Department. The cuts will save about $45,000 in salaries for the 2013-14 fiscal year, which ends June 30, and about $150,000 in salaries in 2014-15, Administrative Assistant Shirley Tapley said.

“We are planning for the worst,” Tapley said Thursday.

The Board of Selectmen voted 5-0 on Monday to approve the layoffs. Tapley acknowledged that the cuts don’t begin to fully address the loss in revenues caused by GNP’s nonpayment. She declined to comment on what steps town leaders would take against GNP or parent company Cate Street Capital if they don’t pay their taxes.

“It is a hard decision. It has been a hard decision for the board [of selectmen] but they are just being proactive at this point,” Tapley said. “Even though it doesn’t save a lot right now, it will help next year, and we’re not sure what is happening at the mill.”

Scott Tranchemontagne, spokesman for GNP parent company Cate Street Capital of New Hampshire, said in a statement released late Thursday that Great Northern “is doing everything that it can to restructure our operations and restart the mill in May so that we can put hundreds of workers back on the job and address outstanding bills.

“We have a multi-point plan that would not only allow us to restart, but also make the mill more viable moving forward. The plan includes reducing production costs and tapping additional sources of revenue,” he said.

GNP laid off 212 of 256 workers on Feb. 6 after ceasing production at the mill, which makes newsprint, on Jan. 23. Tranchemontagne has said the company hopes to restart the mill by May 1 with improved energy efficiencies.

The $657,900 owed by GNP represents almost a quarter of the town’s $2.70 million municipal budget and about one-seventh of its $4.4 million school budget. As of Thursday, the town had a $2.3 million undesignated fund balance, Tax Collector Beverly MacLeod said.

“That will take a big hit if we don’t get the mill’s taxes,” MacLeod said.

As of Thursday, Millinocket Tax Collector Lorene Cyr said Cate Street also has failed to pay Millinocket its property taxes. The company owes in excess of $2.3 million in taxes on its properties, which include a Katahdin Avenue industrial park.

Great Northern Paper is the largest single taxpayer in Millinocket and was, before the layoffs, East Millinocket’s the largest single employer.

Cate Street has encountered tax troubles before. Tranchemontagne said that the company was behind in vendor payments by “a significant number [amount]” and was a year behind in its property taxes in May 2013. The company paid up in August 2013, after Millinocket placed tax liens on its Millinocket properties to help offset a cash-flow shortage that had the town’s undesignated fund balance at a perilously low $800,0000.

Millinocket Town Manager Peggy Daigle said Thursday that Millinocket probably will put liens on Cate Street’s property. As with any late taxpayer, Cate Street will get a 30-day late-tax notice in late April. Once that period lapses, the town has 10 days to file a lien on Cate Street properties, she said.

The town’s undesignated fund has about $2 million now, Daigle said.

“We have our head above water and we are not doing anything rash. I hope that people understand that what we are doing is a statutory requirement for all unpaid taxes,” Daigle said.

Counting a $25 million loan guarantee from the Finance Authority of Maine that FAME’s board of directors voted to award the company in October but has yet to deliver, the company has estimated drawing more than $142 million in tax breaks and loan guarantees for its East Millinocket mill and its plans to build a $140 million pellet mill at a Millinocket industrial park.

Cate Street has been selling scrap from the park, home to a No. 11 paper machine that anchored Katahdin region papermaking for decades, and said the revenues have gone back into its East Millinocket mill. Residents say that the scrap sales have removed so much equipment from the site that restarting that machine is impossible. Company officials have said that they won’t restart the mill until market conditions permit.

East Millinocket and Millinocket leaders have been leery of challenging Cate Street over its tax nonpayment. They say the pellet mill, which promises to create 50 jobs directly and four to six times more indirectly, is a key component to revitalizing the region’s dormant economy.

The company is pushing the Legislature to enact a law that would force mill power supplier Brookfield Asset Management to share profits from wholesale electricity sales. Its passage would “allow us to compete on a more level playing field in an extremely competitive market” while going “a long way” to helping the mill restart and pay its taxes, Tranchemontagne said.

Brookfield’s lawyer has called the idea unconstitutional. Tranchemontagne did not specify whether the mill could or would restart without the bill’s passage.

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